Pricing & margin strategy
Competitive pricing is an essential part of the comprehensive commercialization of a product to ensure market fit and that we hit our sales goals. In my role at Hightower I managed the pricing and margin strategy for Hightower’s robust collection of ancillary contract furniture. The following was part of our ongoing efforts:
Competitive Pricing Analysis - Extensive research was conducted on like items including features, benefits, positioning and pricing. Pricing analysis involved assessing the value of features, benefits, and positioning, understood perceived value around lead times, quality and customization, and took into consideration target margins based on complexity, localization, R&D investment, inventory investment, etc.
Margin Analysis - While the market price was critical to the success of the product, Hightower also had a complex margin structure that was also taken into consideration when pricing a product. Commodity based products, products that were designed, engineered and imported from Europe had varying margin requirements compared to localized products, products with heavy R&D investment, innovation or unique value propositions, etc. Parts cost was also heavily tracked and feedback was provided to the design team when overall costs were trending higher resulting in a lower than anticipated margin. The team was consistently tracking sales by revenue and units, but also tracking sales by margin to ensure we were meeting a blended margin target.
Sales Forecasting - In collaboration with the sales team, ongoing sales forecasting was assessed to understand potential volume at different price points.
Customer Discounting - The contract furniture industry relies heavily on discounting which can vary based on customer type, scope and size of project, breadth of product selection for a project, margin assessment, customer relationship, commoditization of product, etc. All of these factors were reviewed and assessed pre-launch and approved discounting levels were provided to the sales team to assist in winning business. Because of how consistent discounting was requested, forecasting projected discounting was critical to ensure we hit our margin targets.
In addition to setting product pricing, ensuring that products across a robust collection share an organized pricing structure is critical for implementing strategic price adjustments. At Hightower, I led a project where we introduced a Base Model + Finish Pricing Matrix. This structure isolated the base product costs from the finish option surcharges that allowed for improved analytics and the simplified structure allowed for the team to introduce targeted price adjustments based on material cost changes as opposed to having to implement an across the board price adjustment.